Better Pay vs. Job Stability in Wage Debate

By LOUIS UCHITELLE

Published: March 20, 1998

Correction Appended

WASHINGTON, March 19—
The Democrats today formally introduced President Clinton's plan to increase the minimum wage, drawing praise from unions but raising concerns even among supporters that the proposed new level, $6.15 an hour, might cost jobs.

With a ceremonial flourish, Senator Edward M. Kennedy, the principal Congressional proponent of a higher minimum wage, introduced a bill to raise the minimum by 20 percent. That could be high enough, economists say, so that employers might decide to automate or to hire fewer but more skilled and more expensive workers.

Such an acknowledgment of a potential job loss is central to the debate over whether Congress should raise the minimum wage again, so soon after the last increase, in 1996. In 1996, most labor economists insisted that the higher minimum wage would not cost any jobs. It was an argument that carried the day, and it turned out to be true.

Now several of those same economists say $6.15 an hour may be close to some ''tipping point'' at which two or three minimum wage workers in a group of 100 may have trouble keeping a job or finding one. But such potential difficulties, the same economists say, are far outweighed by the financial gains for the 97 or 98 who get the raise and keep their jobs.

The Labor Secretary, Alexis M. Herman, acknowledged the new concern today, saying in an interview, ''I want to put the emphasis on the gainers and not the few potential losers, if there were to be any.''

The bill would raise the minimum to $5.65 an hour on Jan. 1, 1999, from the current level, $5.15, and to $6.15 on Jan. 1, 2000.

At a hearing on Capitol Hill, Mr. Kennedy avoided mentioning job loss. Instead, he and Representative David E. Bonior of Michigan, the House Democratic whip, spoke of the need to pay a survival wage to the workers who care for ''our aging parents and our children.'' Five such workers described their hardships.

Mr. Kennedy acknowledged the shift in the debate, saying in an interview: ''I am not ready to grant the job loss argument. But it is an argument that needs serious evaluation.''

In an election year, raising the minimum wage is a bread-and-butter issue. A majority of Americans favor increasing the minimum, according to polls, and that was a reason many Republicans voted for the increase in 1996. It raised the minimum to $4.75 on Oct. 1, 1996, from $4.25, then to $5.15 on Sept. 1, 1997. About 12 million people, or nearly 10 percent of the work force, are paid $6.15 an hour or less.

But the pros and cons of the debate are more complicated than in 1996. The $6.15 hourly wage, adjusted for inflation, would still be well below the inflation-adjusted minimum in the 1960's, but it would bring minimum wage workers closer to the wage level of more skilled workers than at any time since 1979.

The comparison point used by most economists is workers earning 10 percent below the median hourly wage, a group that in skills is clearly a step or two above those earning the minimum. By the year 2000, that group is likely to be making just over $10 an hour, and the $6.15 would be roughly 60 percent of this amount, about the same ratio as in 1979, says Jared Bernstein of the Economic Policy Institute.

Mr. Bernstein argues that closing the gap is all to the good, because it would help reduce the issue of wage inequality and help ''insure that low-wage workers get a fairer share of the economic growth.''

But other economists wonder whether the higher minimum would squeeze some unskilled Americans out of jobs, or make their search for jobs harder and longer. That question came up in the 1970's but has never been resolved. Two labor economists in particular have drawn attention to this concern: Alan Krueger of Princeton University and David Card of the University of California at Berkeley.

They were big advocates of raising the minimum in 1996, and they favor the bill introduced today on the ground that the pluses would faroutweigh the minuses. In a study several years ago centered on Pennsylvania and New Jersey, Mr. Krueger and Mr. Card had found that lifting the minimum, far from causing job loss, actually increased the employment of minimum wage-workers. That study played a featured role in passage of the 1996 bill.

Other economists argue that passing the tipping point can help the economy by forcing employers into efficiencies they can ignore when labor is relatively inexpensive. Even opponents of another increase in the minimum wage agree that employment would rise, with the minimum at $6.15 an hour, as long as the economy remains as strong as it is today.

Correction: March 21, 1998, Saturday An article yesterday about a new minimum-wage bill in Congress misstated the views of two labor economists, Alan Krueger at Princeton and David Card at the University of California at Berkeley. They do not favor the bill; they have taken no position.